Re: [OPE-L] That hissing? It's the sound of bubblenomics deflating (reformatted)

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Thu Oct 04 2007 - 08:57:36 EDT

Sorry I should have put my and Jurrians names in the sections

-----Original Message-----
From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of glevy@PRATT.EDU
Sent: 04 October 2007 13:30
Subject: Re: [OPE-L] That hissing? It's the sound of bubblenomics
deflating (reformatted)

I had a hard time reading Paul C's reply to Jurriaan so I reformmated
it below so that it's clearer to follow who wrote what.
In solidarity, Jerry

Jurrian wrote:
> I did not "aggregate" the value of the stock of US physical assets
> the stock of US tradeable financial assets, rather I struck a ratio
> between the estimates I had, to give a rough indication of magnitude.
> would say from the data I have looked at that the value of the stock
> financial assets in the US would be larger than the value of the stock
> of physical assets. About half of Americans however own negligible
> financial assets.
Paul C replied:

> It is fair enough to make a ratio between them, but the two numbers
> of different types, and the type of the ratio is yet something else.

Jurriaan wrote:
> First you argued financial assets are "not values but information
> structures, sequences of records held on the hard disks of the banking
> system". Then you argue "social relations are codified in and depend
> upon data structures." But these claims are not the same. I am not
> what to make of this.
Paul C replied:

> No they are not the same, the second is intended to be a clarification
> of the first. It was of course rather brief. The chapter 9 of the
> book  by Ian,
> Greg and I, attempts to investigate the relationship between
> conservation laws, information structures and credit money at somewhat
> greater length.
Jurriaan wrote:
> I do not agree that "In commodity exchange a conservation law holds,
> sum of embodied labour/value does not rise in exchanges" as stated.
> Because this law, if true, would hold only for the exchanges involved
> the production of the gross output (Marx's definition of gross output
> "value of production" differs significantly from the conventional
> measure, as I mentioned). It would presumably mean that no net
> to the new value created can result from the exchange of newly
> commodities only, or, that exchanges or products can only redistribute
> values, not add to them. This idea is strongly contested by bankers,
> e.g. because without operating certain transactions the product-value
> would not exist at all etc.
> Yet assets are being devalued and revalued all the time, whether they
> are being traded or not. The conservation law would then presumably
> state that for every devaluation of some of the new commodity output
> there must be an equal revaluation of some other component of the new
> commodity output (?).
> However, at least one aspect is that the exchanges of total inputs and
> total outputs in the sphere of production are not all the exchanges
> there are. External to that sphere, a large trading process occurs as
> well. When Marx referred to values, he referred only to components of
> the gross output on his definition, not to total trade volume.
> One could depict unequal exchange in the trade in products as being
> a redistribution of values between different owners.
Paul replied:

> Depends what you mean by value. By value I always mean socially
> necessary labour time embodied.

> This clearly can not be created in exchanges, but a conservation law
> says more than this. It says that the each agent engaged in exchange
> tends to retain the same stock of socially necessary labour time in
> commodities they hold. This is not absolutely the case because there
> some dispersion of exchange ratios around value ratios, but the
> dispersion is small, and taken as a whole it is a zero sum game.
> If you start confusing value with price, then of course it can appear
> that the whole system is non-conservative, since an inflationary
> increase in the money stock can bid up asset prices

Jurriaan wrote:
> When new debt is incurred, then in a conventional balance sheet it
> obviously appear on both sides of the ledger, i.e. for every asset
> is a liability, that's clear. I am not sure though what you mean by
> L1 norm in this case - this seems to refer to a mathematical technique
> to discover a function/vector that will most closely describe/fit a
> set (?).

Paul replied:

> L1 norm or,  Manhattan metric, is  the sum  of absolute values of
> elements of a vector
> Assume an agent has a vector of assets and liabilities, the L1 norm of
> these grows both with increasing assets and increasing liabilities

Jurriaan wrote:
> I do not know what you mean by "real capital", I assume you mean
> tangible physical assets or productive capital (?).
Paul replied:

> I mean aggregations of structured matter whose entropy has been
> as a result of labour, and which can be used for productive purposes.

Jurriaan wrote:
> In Cap. 2, Marx distinguished broadly between commodity capital, money
> capital, and production capital. Financial assets would presumably be
> component of money capital. He also refers to "fictitious capital" or
> "fictitious commodities" though he fails to specify exactly what he
> means by that, it could be thought of as a capitalisation on property
> ownership. In Marx's analysis, capital can, assuming a developed
> and capital market, flexibly transit from one form of capital to
> another. Thus, if for some reason production becomes a more risky or
> less profitable avenue for accumulation, capital exits from the sphere
> of production to the sphere of circulation. It does not cease to
> accumulate, but the mode of accumulation changes, i.e. instead of
> M-C...P...C'-M' the circuit becomes M-M', M-C-M', C-M-C', C-C'
> (=countertrade) and so on.
Paul replied:
> This will not add up Jurrian.
> In Marx's volume 1 analysis the money stock is conserved, it is
> impossible, in aggregate for capital to move from productive form into
> money. An individual capitalist can do this but only to the extent
> another capitalist buys commodities from him, and thus undergoes the
> reverse move.
> There is no adequate formal analysis of debt or bank money in Marx.
Jurriaan wrote:
> The corollary is that capital which is not production capital exists
> either as commodity capital (lodged in tradeable goods, physical
> or tangibles of some sort) or as money capital (lodged in financial
> claims of some sort) or fictitious capital (fiduciary claims of some
> sort). Instead of producing anything extra, you can use capital to buy
> up real estate, or companies, or trade in money, equities, securities,
> other financial products etc. (a current favourite is "buy-outs"). It
> would not be too difficult to show, with various statistical
> that in aggregate the total stock of money capital and commodity
> grows much faster, and is larger than, the total stock of production
> capital (well, in this regard actually the Fed axed the computation of
> M3, which was increasing around 12% yearly, as against about 10% in
> EU and 3 or 4% in Japan and possibly 20% in China).
Paul wrote:
> The measure M3 is roughly 0.5 times the l1 Norm of bank accounts, this
> does grow, but the commodity norm does not.
> I explain these different norms in the chapter I mentioned.

Jurriaan wrote:
> Marx's knowledge of the role of capital finance in the historical
> origins and development of capitalism was rather sketchy, and he did
> live to work out the ideas he presents in Cap. Vol. 3 in more detail.
> there is a lot more work to be done in that area, to make sense of
> historical and current realities in terms of the approach he favoured.

Paul replied:
> I agree with the last point

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